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Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories

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  • Zvi Safra

    (Tel Aviv University)

  • Uzi Segal

    (Boston College)

Abstract

Rabin proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin's arguments strongly depend on expected utility theory, but we show that similar arguments apply to almost all non-expected utility theories and even to theories dealing with uncertainty. The set of restrictions needed in order to avoid such absurd behavior may suggest that the assumption of universality of preferences over final wealth is too strong.

Suggested Citation

  • Zvi Safra & Uzi Segal, 2005. "Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories," Boston College Working Papers in Economics 633, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:633
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    Cited by:

    1. Zvi Safra & Uzi Segal, 2008. "Calibration Results for Non-Expected Utility Theories," Econometrica, Econometric Society, vol. 76(5), pages 1143-1166, September.
    2. Schmidt, Ulrich & Zimper, Alexander, 2003. "Security and potential level preferences with thresholds," Papers 03-29, Sonderforschungsbreich 504.
    3. Daijiro Kawanaka, 2023. "Mixture Attitudes of Expectation-Based Loss Aversion," Discussion Papers in Economics and Business 23-02, Osaka University, Graduate School of Economics.

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